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E-Mini Crude Oil Futures Volatility Forecast (29/05/2011)

The great depreciation of the US dollar affected not only the “remaining” currencies but it inevitably influenced crude oil prices. Specifically, the market opened at $ 97.5 retested the $ 101 threshold on Wednesday but E-Mini Crude Oil futures did not manage to break through this level and kept moving sideways for the rest of the week. In fact, on Thursday the closing price was $ 100.3 whilst $ 100.7 was the last price print on Friday.

The current volatility is 1.5% (23.8% in annual terms) and the TGARCH plot is still displaying a downward sloping curve which is probably going to settle around the equilibrium point which, in this case, is stable around the 1.1% – 1.2% level (17.4% – 19% annualised).

The sharp and violent depreciation of the American currency and the slightly increased demand (particularly from China and India) have been the most influential market movers the last week and that is precisely why E-Mini Crude Oil futures rallied and achieved the $101 threshold.

However, the conditional variance should not augment over the next trading days and it is probable that the beginning of the next week will see a sideways movement of futures prices followed by an ulterior surge.

The HyperVolatility team is bullish E-Mini Crude Oil futures because the diminishing oscillation rate should back the price action which should retest the $ 103 – 104 area by the next Friday.

Furthermore, the violent depreciation of the US dollar is going to act as a catalyst and consequently many investors and traders will “use” it to earn extra profits.

E-Mini Crude Oil Futures Volatility Forecast (23/05/2011)

E-Mini Crude Oil futures moved higher as we forecasted the last week although the rally was not as powerful as we thought. In particular, the market opened at 97 rose to 99.7 on Wednesday but 99.8 was the closing price registered on Friday.

The volatility is now around 1.9% – 2% (30.1% – 31.7% annualised) and the curve seems to suggest a quite level of market fluctuations in the upcoming days since there is a progressive “softening process” going on.

The fluctuations of the price are clearly lined to the performance of the US dollar against the euro in the last week and the surge of E-Mini Crude Oil futures has been caused by a depreciation of the American currency in the first half of the week (even though on Friday the Euro lost terrain).

Furthermore, it is evident that the market fluctuations rate is now very close to its equilibrium point which is stable at 1.4% (22.2% annualised) and the volatility will probably tend to conclude the mean reverting process before heading north once again.

The HyperVolatility team is bearish on this market because the conditional variance is likely to augment in the next trading days whilst the price should retest the $ 95.5 – $ 96 area and the ulterior strengthening of the greenback should negatively influence the oil market.

Furthermore, the extremely high oil prices we saw over the last 2 weeks had a significant impact on the global demand, which irremediably decreased, and therefore it is reasonable to believe that the OPEC will try to keep prices at a more sustainable price for a while in order to even out the imbalance.

E-Mini Crude Oil Futures Volatility Forecast (15/05/2011)

E-Mini Crude Oil futures sharply plummeted over the last week whilst the conditional variance dropped as we correctly forecasted 1 week ago. The market opened at $ 103 plunged at $ 99 on Wednesday whilst $ 99.5 was the closing price registered on Friday.

The actual volatility is around 3.5% (55.5% in annual terms) but the TGARCH curve is still downward sloping although futures prices kept decreasing in value over the last trading days.

The volatility is clearly going through its mean reverting process, which would inevitably stop once the conditional variance reaches the 1.8% – 2% level (28.5% – 31.7% annualised).

Consequently, it is reasonable to assume that over the next hours the oscillation rate will continue its “journey” towards the equilibrium point whilst futures prices should recovery.

The HyperVolatility team remains moderately bullish on E-Mini Crude Oil futures because the variance is heavily collapsing and such a phenomenon should support the price action which could eventually rise and retest the $ 103 area by the next Friday.

However, a sideways movement of the price is not an eventuality to opt out (particularly in the first half of the next week).

E-Mini Crude Oil Futures Volatility Forecast (10/05/2011)

The last week we were bearish E-Mini Crude Oil futures because more volatility was expected to hit the market and our forecast proved to be enormously profitable. Specifically, the market opened at $ 113 dropped to $ 108 on Wednesday but the $ 98 per barrel registered on Friday was an absolutely shocking performance.

The actual volatility is around 7% (111% annualised, believe it or not) however it is important to point out that the massive drop the market went through has been mainly caused by a sharp appreciation of the US dollar, which inevitably dragged futures prices down, and by the transfer of significant capital operated by some commodity hedge funds because the fundamental picture (oil supply and demand) did not change much.

However, the upcoming days should see a gradual and constant decrease of the conditional variance because the current oscillation rate is clearly not sustainable in the long run. As a consequence, the diminished market fluctuations should favour a recovery of the price which should head north once again.

The HyperVolatility team is bullish on E-Mini Crude Oil futures and we will place some longs as soon as possible because the price should retest the $ 105 area by the end of the week whilst the volatility curve should mean revert and collapse towards the 1.8% level (28.5% in annual terms).

E-Mini Crude Oil Futures Volatility Forecast (02/05/2011)

E-Mini Crude Oil futures moved higher even this week although we forecasted a bearish movement of the price. Specifically, the market opened at $ 112 rose to $ 113 and then closed to $ 113.7 on Friday.

The current volatility is 1.4% (22.2% annualised) and the TGARCH is displaying a quite stable volatility curve which is a pretty strange phenomenon for such a volatile market.

Moreover, the big rally in oil prices has been mainly caused by the sharp depreciation of the US dollar against the European currencies (particularly Euro and Pound Sterling) and therefore there is no, apparently, strong fundamental reason (such as a shortage of supply or an increased demand) which justifies such a boost in price.

The HyperVolatility team remains bearish on E-Mini Crude Oil futures because the volatility will tend to mean revert and explode in the upcoming days dragging down futures prices in the $109 – $ 110 zone.

Finally, such high oil prices will probably tend to decrease because a further augment could provoke a shrinking in the demand of oil and therefore a loss in terms of capital for the OPEC.

E-Mini Crude Oil Futures Volatility Forecast (24/04/2011)

The last week we were bullish on E-Mini Crude Oil futures and our analysis proved both useful and profitable since the $ 110 target was abundantly surpassed. In fact, futures prices opened at $ 107.1 rose to $ 111.4 on Wednesday but the $ 112.2 was a really pleasant surprise.

The chart shows an upward sloping curve which is now at 2.1% (33.3% annualised) and it is probably going to rise even more over the next trading days dragging down E-Mini Crude Oil futures prices.

Furthermore, the analysis we ran on Euro futures is now suggesting that, at least in the short term, the US Dollar will appreciate against the European currency and, should our forecast be correct, this phenomenon would act as a catalyst for the plummet of oil prices.

The tensions in Libya seems to be less of a problem now and many investors appear to be more concerned about the Euro vs Dollar exchange than anything else. In fact, the news coming from US regarding the rising Federal debt managed to drive down the market quite sharply the last week and this caused the spot rate to hit the $ 1.45 level.

The HyperVolatility team is moderately bearish on E-Mini Crude Oil futures because prices should head south and eventually hit $ 109.5 – 100 by the end of the next week. Consequently, we will place some shorts as soon as possible but should the volatility curve drop and touch the 1.8% area (28.5% annualised) we would probably look for long opportunities.

E-Mini Crude Oil Futures Volatility Forecast (18/04/2011)

The last week we were moderately bullish on this market even if we were expecting a short term retracement which could have dragged E-Mini Crude Oil futures down and clearly our analysis was right once again.

The market opened at 109 dropped to 106.5 and then rose again to 109.4 the last Friday whilst the volatility touched 2.4% (38% annualised) and then dropped significantly to 1.8% (28.5% in annual terms) although the curve seems not to have reached the bottom yet.

On the other hand, the US dollar keeps depreciating against the Euro and such a factor is probably going to maintain oil prices in the current area and if we consider that the situation in Libya is still uncertain the bullish view seems to be the most likely scenario.

The TGARCH curve will tend to mean revert in the 1.6% area (25.3% annualised) and this should keep E-Mini Crude Oil futures in the current zone although the conditional variance will tend to augment and provoke a short term retracement.

The HyperVolatility team remains moderately bullish on this market and we will place some longs as soon as a good opportunity will arise. There might be a bit of a down movement this week but futures prices should get back in the $ 110 area by the end of the week.

E-Mini Crude Oil Futures Volatility Forecast (10/04/2011)

The last week we were expecting an ulterior rise of E-Mini Crude Oil futures prices and our profit target was set to be at $ 110. However, our quantitative analysis proved even more profitable because futures prices touched $ 113 on Friday.

The actual volatility is 1.48% (23.4% in annual terms) but the chart is displaying a situation which is quite steady, in terms of volatility fluctuations, and such a scenario seems stressing a probable further rise of futures prices.

Nonetheless, the rise would not be that powerful because once achieved the $115 – 115.5 area the volatility should increase and bring some sideways movements that would destabilise the price action.

The HyperVolatility team is moderately bullish on E-Mini Crude Oil futures but we believe that a retracement is on its way, hence, the more the market goes up the higher the instability. Even in this case the volatility curve is inevitably going to indicate the time to close out the long positions.

Furthermore, the tensions in Libya are still generating concerns amongst investors but extremely high oil prices could irremediably shrink the demand and we think that the OPEC will act in order to prevent this from happening. Finally, the depreciation of the US dollar acted as a catalyst in the recent rally and a short term depreciation of the Euro would drag prices down once again.

E-Mini Crude Oil Futures Volatility Forecast (03/04/2011)

The E-Mini Crude Oil futures rallied and achieved $ 108 the last Friday and the sharp rise is an evident signal that investors are extremely worried about the situation in Libya.

The last week we were bearish on this market but the low volatility fluctuations warned us against a price surge, even if the sideways movement which characterised the first half of the week was correctly forecasted by our previous analysis.

The TGARCH curve is now around 1.6% (25.3% in annual terms) and it is fluctuating within the equilibrium point. However, the upward sloping curve could not necessarily imply a potential market retracement but an ulterior attempt of bulls to push E-Mini Crude Oil futures towards the $ 110 area.

The HyperVolatility team is bullish on this market and we will place some longs as soon as the market is going to open because futures prices should achieve $ 110 by the next Friday.

However, once achieved this threshold there might be a sideways play or a short term retracement with the volatility achieving the 1.8% level (28.5% in annual terms). As a consequence, will tighten our stops or alternatively close our positions.

E-Mini Crude Oil Futures Volatility Forecast (27/03/2011)

The E-Mini Crude Oil futures moved higher as we correctly forecasted the last week and we hope you all took advantage of our successful market view since futures prices achieved $ 105.6 a barrel. A great trade indeed!!!

The volatility is now in its equilibrium range and it is approximately 1.58% (25% annualised) but even if the TGARCH plot is still downward sloping there might be a great chance for a last rise before heading south again.

The volatility should remain stable in this area in the next 2 trading days but there is a big possibility that a sudden increase towards the 2% (31.7% annualised) could push the market down.

Furthermore, the strengthening of the dollar could favour a further drop of the price that should retest the $ 100 – 101 a barrel zone.

The staff of HyperVolatility remains moderately bearish on E-Mini Crude Oil futures because it appears that a first sideways movement would be followed by a price drop.

On the other hand, the political crises and the war in Libya could change the situation in a matter of a few minutes since Libya is the 12th largest oil exporter in the world and although it decreased its extraction rate other OPEC partners, such as Saudi Arabia, Kuwait, and Qatari, are trying to even out the imbalance by pumping more oil out of their wells.

How the market is going to react to this? There is still a lot of uncertainty surrounding the oil market and the recent choppy trading sessions we had simply confirmed what we just stated.

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